While I am still getting treatments at the trauma-specialized facility in the rural part of central France and pick up mushrooms when I have some breaks, Stock Markets are booming…
My own stock market portfolio and crypto portfolio are on fire!
Since the pandemic outbreak – about 18 months – the S&P 500 index has gained as much as 98%, which is on track for the most record highs since 1995!
And it’s not just stocks hitting all-time highs… Real estate, commodities (like copper, aluminum, cotton, etc.) are booming, too.
Cryptos, after yet another correction, started rising as well. Bitcoin dropped from the top $63K this year to almost below $30K and now it’s over $45K….
Unfortunately, many average investors, and especially wannabe investors haven’t enjoyed these spectacular returns.
So why the average investors are doing so average or even poorly when markets are making new all-time highs?
Specifically, fear of investing and losing money.
You see, the fear and bad past experiences shake many investors out of the market. Or worse yet, they enter markets at tops and sell at bottoms….
Remember this: the greatest opportunities often come from new or hated-by-the-crowd ideas and when “risk is off” – market panic escalates and fear runs high.
That’s when people are most uncomfortable with putting their money to work…yet it’s also the best time to invest.
Today, I want to share with you 5 ways to conquer the investing fear by making more rational investing decisions and protecting yourself from the greatest risk of loss while positioning yourself for the greatest opportunity for gain.
5 Ways to Reduce Fear of Investing and Position Yourself for Financial Success
1. Diversify your assets.
In short, Diversification is the secret to building wealth and, most importantly, keeping it!
That’s why I keep talking about the benefits of diversification because it’s SO important. You can find my mini-training on this topic on my youtube channel.
Personally, I like a mix of stocks, real estate, cash, bonds, precious metals, collectibles, cryptos, business, and other alternatives.
Not only diversification leads to better returns, but it also lowers your investing risk!
Numerous studies show that asset allocation accounts for 90%-plus of your investment returns.
2. Invest Long-term.
Unless you’re a day trader, daily volatility shouldn’t bother you.
Markets fluctuate all the time – don’t get distracted by the short-term “performance” noise.
The market’s short-term direction is unknowable.
Any headline or macro-event can shift the market trend. Even experts get it wrong more often than they get it right.
So, focus on the big picture.
3. Develop investing discipline.
Here’s what I mean here….
Decide and implement regular contributions toward your investment account(s).
Set up a direct deposit in your taxable brokerage account. You can start with $100 or $50 per month. Choose a comfortable amount that won’t impact your daily life.
And take advantage of your retirement plans, like an IRA or 401k, where you allocate part of your pre-tax paycheck to investments (especially if your employer matches your contribution to the 401K).
I prefer IRAs because you can choose what to invest in vs 401Ks usually give you limited choices of mutual funds.
And, if you currently don’t need income, make sure to set up your account to “dividend reinvestment” for all your ETFs, mutual funds, and dividend-paying stocks.
4. Use risk management tools.
There’re various ways to manage investing risk (and I already mentioned some of them here) so that you not only grow your wealth, but also protect what you have.
And one of the best way to do that is with position sizing.
Position sizing is one of risk management tools that refers to the size of a position within your portfolio (or the dollar amount you’re going to invest in one position like a stock, ETF, etc.).
If you find you can’t sleep at night, then you probably have too much invested in one idea or more.
My simple rule of thumb is: If an investment in my portfolio is not performing, my maximum loss should be no more than 1%–5% of my portfolio’s value.
Here’s the rational for this rule: if you limit your downside, then you can sleep at night knowing that you limit your losses. This way, you won’t panic-sell at the worst time.
5. Create a plan and stick to it.
I bet you heard the expression “When you fail to plan, you plan to fail”.
And it’s true…
So, create your investing plan, review it and rebalance it periodically and stick to it!
For instance, set a goal of how much you want to invest per year. Or commit to raising your direct deposits $50 per month or quarter until you reach your goals.
And consider adding new investment ideas to your portfolio.
If you have a life-changing event, revaluate your plan at that time. However, sticking to a plan will keep you from making emotional investment decisions (both – buying and selling).
The Bottom line:
If you implement these 5 suggestions, you’ll be able to ride the stock market to new highs without getting shaken out during times of volatility.
And historically, in high inflationary environments (and we’re expecting one soon), stocks seem to be more volatile.
I know these 5 suggestions may seem daunting. And you may be thinking, “Easier said than done.”
So, I challenge you to put these suggestions into action NOW and share your actions in my private FB group – Wealth Building for Powerful Women.
It’s not that hard to train yourself to become a mindful and strategic investor.
Before you know it, not only will you outperform the average investor…you’ll also significantly move the needle on your financial net worth.
To your Health, Wealth and Freedom! ?
P.S. If you’d like to access ALL my mini-trainings about money management and strategic investing – sign up for my youtube channel – MillenLivisChannelWealth, so you’ll be notified about every new training uploaded there.